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Chrysalis bonding, big-time

Involves rights to works by Jethro Tull, Billy Idol

NEW YORK — A U.K.-based bank has arranged perhaps the biggest-ever securities deal of its kind, packaging projected future revenue from the Chrysalis Group international music publishing catalog in a complex transaction valued at roughly $90 million.

The deal, to be announced today by Royal Bank of Scotland, involves a securitization, or an investment instrument based on bonds backed by collateral from anticipated future revenue — in this case from pop-music publishing rights.

Such securitizations are commonly called “Bowie bonds” or Pullman bonds, for investment banker David Pullman who did a deal a few years back involving rocker David Bowie’s music.

Chrysalis Group controls a catalog of worldwide publishing rights for music on the Chrysalis label and other recordings for which the London-based group has been acquiring rights in the 1990s.

The publishing group is run by many of the same execs who operated the Chrysalis label until it was sold to EMI. Its 50,000-song catalog produces $12 million in annual revenue, officials estimated.

“This provided an excellent base on which to structure the deal,” said Rob Horowitz, an asset securitization exec in the financial markets division of Royal Bank of Scotland.

At roughly $90 million, the deal’s debt facility represents about 40% of the estimated value of the Chrysalis catalog, execs said.

“(The deal’s) completion brings to a close a process that has taken some 18 months,” Chrysalis financial director Nigel Butterfield said. “The end result is an innovative structure to accommodate what we believe will be the largest-ever securitized music deal and certainly the first to involve a multi-jurisdictional international music-publishing catalogue.”

The Chrysalis catalog involves rights to compositions by several thousand writers over the past 30 years by artists including Jethro Tull, Billy Idol, Portishead, the Chieftains, David Gray, Outkast, Smashing Pumpkins and others. The transaction anticipates revenue over the next 15 years from past recordings and new recordings expected over the next three years.

Its projected cash flow — from conventional publisher rights and synch rights involving fees for use of songs in film and TV — involves music publishing rights in five countries.

“Each jurisdiction has different copyright law, so it’s difficult trade,” Horowitz said. “That’s why the deal took the amount of time it did. It’s one debt structure but five deals on a securities basis, because we addressed the securities laws on an individual-country basis.”

Royal Bank of Scotland structured and arranged the deal, and liquidity support for the transaction was shared by RBS and Britain’s Barclays Bank.

Previous music securitizations, most valued between $10 million to $50 million, have been created with anticipated future revenue from recordings of artists including James Brown, Marvin Gaye and the Isley Brothers, and publishing rights of Motown’s Holland-Dozier-Holland writing team.

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